Local taxi firms stay clear of pricing war with Uber and Ola

Local players have kept off this fight, betting instead on realisable targets such as improving reputation among customers and focusing on increasing supply of cars.Bharani Vaitheesvaran | ET Bureau | April 20, 2016, 08:58 IST

CHENNAI:Taxi services firms Fast Track and NTL Call Taxi will steer clear of the ongoing pricing war between Ola and Uber after they got singed last year when they joined the rate-cut race. Uber and Ola are locked in a bitter price battle with Ola taking on UberGo with its Micro service.

Plus, Uber has been aggressively pushing into non-metro areas announcing rate cuts between 9% and 22% while Ola is unveiling similar expansion plans for the Micro service. Local players have kept off this fight, betting instead on realisable targets such as improving reputation among customers and focusing on increasing supply of cars.

“We are not for price cuts because we do not believe discounting can be a market expansion strategy. Timeliness and quality of service and good driver behaviour are sustainable bets,” said MPrabhu, chairman of 15-year-old Fast Track, one of the oldest taxi services, born in the call centre era and still sustaining that service. Fast Track, which provides radio taxi services in Tamil Nadu, Karnataka, Andhra Pradesh, Kerala, Maharashtra and West Bengal, had announced an economy service early last year, pricing it at Rs 11 km but running it alongside its regular fleet of cabs charging Rs 15 a km.

Its competitor NTL had tried out an economy service briefly last year but pulled it out on reasons of unsustainable cash burn in compensating drivers for the discounts. Its hatchbacks charge Rs 16 for every additional kilometre after the first six charged at Rs 150. “At such a deep discount, the rides offered by Ola and Uber compete with the autorickshaw,” said G Saravanan, director at NTL Call Taxi. He added that the sharp discounting could turn out to be a threat to even three-wheeler transport in Chennai, which has well over 70,000 of them. NTL is attempted to raise venture capital funding to take on the app-based aggregators, but finds a market laden with competitors and mounting pressure on volumes deterrents in attracting investors. Uber disagrees with the thinking that driver incentivisation is the support for its discounting.

Bhavik Rathod, general manager for South and West markets in India for Uber, said the engine that enables lowering prices was the locationbased vehicle dispatch mechanism. It enables Uber to cut idle time and the distance drivers go with a passenger, making them earn more every hour and pass on a portion to customers. “At Uber, the thought process is this: When we lower prices, it triggers demand because more people would want to use our service.

This leads to higher earnings per hour for the driver. Globally, in many countries that Uber launched about two and a half years ago, we have reached a stage where it is incentive-free and we are profitable.” Rathod toldET. Zishaan Hayath, an early-stage investor in Ola and founder of education start-up Toppr, believes the potential of the taxi market is large enough for competitors to co-exist and grow.

“Ola and Uber are highly innovative companies operating in a highly dynamic market environment. What these companies were a year back, they are not today. Consumer focus and quality of service are the operative words here. For example, Ola Micro, launched recently, is supposed to be growing at an amazing click. It could have been any company that devised such a service and it would find space in this market,” said Hayath.